McDonnell Proposes to Reinstate Tax Deduction for Virginia Employers
April 13, 2010
RICHMOND- Virginia Governor Bob McDonnell announced today that he will propose an amendment to the biennial budget passed by the General Assembly to reinstate an important tax deduction for Virginia employers.
FOR IMMEDIATE RELEASE April 13, 2010
Contact: Stacey Johnson Phone: (804) 225-4260
E-mail: Stacey.Johnson@Governor.Virginia.Gov
Governor McDonnell Proposes to Reinstate Tax Deduction for Virginia Employers
Governor Calls for Retaining the Virginia Domestic Production Activity Deduction
Tax Measure Supports Virginia Companies; Encourages Job Creation
RICHMOND- Virginia Governor Bob McDonnell announced today that he will propose an amendment to the biennial budget passed by the General Assembly to reinstate an important tax deduction for Virginia employers. Virginia law previously allowed companies to claim the federal Internal Revenue Code (IRC) Section 199 Domestic Production Activity Deduction. The deduction was passed at the federal level in 2004 to encourage domestic manufacturing and keep companies from locating offshore. However, in the original biennial budget presented by the prior Administration the deduction was eliminated effective for taxable years beginning on and after 2010. The General Assembly adjusted this slightly, moving to gradually phase out the deduction by 2014. The elimination of the deduction would eventually result in an estimated $30 million tax increase on Virginia employers.
Speaking about the amendment to keep the deduction in place the Governor noted, “We must take every step possible to keep employers in Virginia. States that allow businesses to take a Domestic Production Activity Deduction gain a major advantage over competitors both here and abroad. Many states have chosen not to allow job-creators to take this deduction; Virginia should not be one of them. I am asking the General Assembly to agree to our amendment allowing deductions of up to 6% of income attributable to domestic production activities. This is a pro-job creation amendment that will help keep employers in the Commonwealth, encourage businesses to locate in Virginia and give us a further advantage over other states.�
The Governor’s amendment will have no fiscal impact in FY 2011 and an estimated fiscal impact of $10 million in FY 2012. The money to fund this change will be derived through budgetary amendments and actions the Governor will formally propose this week. The Governor has until midnight tonight to send down his amendments and vetoes on all budget matters and legislation prior to the reconvened session of the General Assembly on April 21st.
